Many CEO are quick to trumpet the values of their organization and how these values inspire and motivate their workforce. But according to a new report, as far as most American companies are concerned, the reality is completely different.
In fact, far from being inspired by corporate values and a commitment to a mission and purpose, more than eight out of 10 (84 per cent) of U.S. employees say that they are primarily managed by coercion, while a further one in 10 (12 per cent) can at least say they sometimes enjoy a little carrot to go with the big stick.
In stark contrast to what their CEO may say, that leaves just four per cent who are inspired by their organization's higher purpose: in fact, CEOs in corporate America are six times more likely than their workers to believe that theirs is a company whose people are inspired
The findings come from TheHOW Report, a study of more than 5,000 full-time employees in 2,000 companies commissioned by LRN, a consultancy that helps businesses develop ethical corporate cultures.
The study compares the effectiveness (in terms of business returns) of various models of governance, culture and leadership and the behavior of management and employees.
"What you measure is a window into what you value. As institutions, we've gotten incredibly good at measuring 'how much' as in 'how much' revenue, profit, market share, resource, debt, etc," said Dov Seidman, CEO of LRN.
But measuring 'how much' ignores a more fundamental metric, the report argues - 'how' - the belief that what we do is not nearly as important as how we do it. And those organizations that are able to inspire employees to 'self-govern' through inspirational leadership and shared values can drive sustainable business performance and success.
"Creating resiliency and forging a path of sustainable growth requires leaders to rethink the very nature of how their organizations operate and how their people conduct business," Seidman went on.
"We have entered a new era where it is possible to measure how we operate, lead and govern our institutions. And this study demonstrates that it is, indeed, practical to be principled."
Companies that do 'self-govern' through values significantly outperform those who don't on a whole raft of metrics, the report found. They demonstrate higher levels of innovation, employee loyalty, and customer satisfaction, and lower levels of misconduct, employee fear of speaking up and retaliation. Employees in self-governing companies also report stronger financial performance relative to the competition.
But this self-Governance is extremely rare in corporate America. A mere three per cent of the respondents to the survey said that they work for organizations in which purpose and values inform decision-making and guide behavior.
Moreover, almost six out of 10 said that short-term mindsets prevail in their organization and seven out of 10 complained that their organization is fixated on traditional methods of success – namely the immediate bottom-line - rather than on long-term significance.
Bearing this figure in mind, it is impossible to escape the conclusion that in the vast majority of American organizations it isn't values that drive employee behaviour, it's fear.
The ramifications of this for corporate governance, productivity and financial performance, are significant and spelt out unequivocally by the study's findings.
For example, more than nine out of 10 (94 per cent) of respondents work for organizations that do not make them feel completely comfortable in speaking up when they see misconduct, challenging the status quo, or voicing alternative opinions.
Yet in self-governing organizations, more than nine out of 10 agree that employees report unethical behavior when they see it, compared to six out of 10 in what the study characterizes as "informed acquiescence" companies and just a quarter in "blind obedience" companies.
Companies that rely on rules and policing, command-and-control leadership and coercion also fair far worse in terms of innovation, customer service and employee satisfaction.
Self-governing organizations are five times more likely to welcome and adopt good ideas get adopted, they enjoy almost nine times the level of observed customer satisfaction and their employees are twice as likely to believe that their company has a good reputation among its customers. As a result, employees at these organizations are nearly three times more likely to refer a friend to their company.
Taken together, these four characteristics of self-governing organizations - less employee misconduct, greater innovation, employee loyalty and customer satisfaction - help to deliver better financial performance.
But sealing the deal is the fact that in top-down, coercive companies, trust is at a premium. Fewer than one in 10 (9 per cent) employees believe that theirs is a high-trust organization and over nine out of 10 don't think that they work in an atmosphere that encourages information sharing and coordination between departments and groups.
This implication is that corporate America will lose its competitive edge unless it takes a very hard look at itself and begins to match the empty rhetoric about values and culture with substance.
In particular, the report argues, companies need to ditch their misperceptions about culture: that it is naturally forming and can't be shaped, that it is a soft currency and not directly related to tangible results and that it can't be measured any more than happiness or well-being.
"Culture is the sum total of the behaviors of the individuals who comprise an organization," the report states. "And it's these very behaviors - how decisions are made, how people are treated, how things really work - that drive important business outcomes."
As Dov Seidman concludes, "a super-system of culture, governance, and leadership as a conscious, deliberate, long-term strategy can be key to differentiation, success and significance for companies in the 21st century," said.
"Companies and leaders who pioneer and forge ahead on a genuine journey of governance, culture and leadership are the ones who will be around in the 22nd century."